Come to us and we may be able to save you

Don’t be shy of the insolvency practitioner – he could be your saviour. Jenny Chapman talked to three of the region’s leading practitioners, two of them accountants, the other a lawyer.

Their shining armour may not be immediately apparent, but the regions’ insolvency practitioners are raising their profile in a bid to stem what they foresee as a wave of businesses going bush this year.

Their message is: “Come to us sooner rather than later and we may be able to save you.”

History tells us that it is after a recession is officially over that companies really start to fall off the perch.

Chris McKay of McTear Williams & Wood in Cambridge, said: “In the seven quarters following the recession in the early 1990s the number of insolvencies climbed each time.”

The problem is that everyone gets tougher when things look brighter, not least the taxman.

“The theme over the past year has been tolerance, but this is going to change,” Chris said.

“Tolerance has been encouraged by government in the run up to the general election,” added Laurence Weeks, a lawyer with Taylor Vinters and chairman of R3, the region’s insolvency practitioners’ association. “But this is all going to change.”

“If you have let down HMRC once you are going to be in trouble. They used to be at the front of the queue when a business went bust, but now they are at the back, and they are going to get tougher.

“In January the Government did not get nearly as much money in tax as usual, and as a result had to borrow.”

He continued: “The story about Portsmouth Football Club has relevance in Cambridge businesses. Directors – need to be aware if they are deliberately avoiding paying VAT, that they could disqualified, and company secretaries are going to become much more liable which, I guess, most companies out there don’t know.”

He was speaking on the day Portsmouth FC was being taken back to the High Court by HMRC, which is challenging the club’s move into voluntary administration.

During the recession the Government introduced a ‘Time to Pay’ unit to help struggling companies by giving them extra tie to pay VAT and PAYE, but as the situation in January illustrates, the country can’t afford it.

Members of R3, which stands for Rescue, Recovery and Renewal (three words chose to replace ‘Insolvency’ which is seen as “not a very nice word”) met at Duxford last week for their quarterly gathering , and the meeting was packed, with 80 getting tickets and a dozen on the waiting list.

They wanted to find out about new rules coming in next month, although nobody seemed very sure exactly what would be changing, art from, as Shay Lettice, insolvency practitioner with Cambridge accountants PEM, said “That we have to be more transparent and accountable, and get paid less to do the job.”

Doubtless the big turnout also had something to do with the location this time – all those aeroplanes to look at – but also the feeling that IPs are going to be getting busier as the year goes on.

Laurence says any business worried about its financial future should consider going to an IP when the first signs of difficulties emerge: “We have contacts in the banking world. If you go to the bank alone you may not get anywhere, but if you go with an IP the outcome could be different.”

“We have never had a CVA (Company Voluntary Arrangement) which has not been accepted in the 15 years I’ve been with PEM,” Shay said.

CVAs, these days, are just one route out of trouble. Pre-packs are getting a fair amount of publicity, they involve selling off the company, usually to the existing owners, before the business goes into administration, so that nothing changes in the day-to-day operations.

“Pre-packs are beneficial. The creditors have already lost out because you don’t go into a pre-pack unless you are insolvent, but this does give the best return to creditors because it’s about avoiding a fire sale and preserving value. The survival of the company as a going concern has got to be good for everybody, especially as these days the preferential creditors are the employees.”

“The next six months things are going to start ramping up,” Shay said.

“And one of the risks for Cambridge is the coming cuts in public services,” added Chris.

“Cambridge is one of the highest ‘at risk’ areas in the country for cuts and when they come this will mean job losses in the private sector as well.”

We suspect there are a lot of wobbly companies,” Laurence said. “These are dangerous times.”

Cambridge News
9 March 2010

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